Blockchain: a “disruptive” overview on various commercial sectors

Alessio Balbo di Vinadio – Trainee at Clarke, Modet & Co. Spain
Gilberto Macías – Senior Advisor and Lawyer at Clarke, Modet & Co. Spain

In 10 years 10 percent of the global GDP will be stored in blockchains” this data insight comes from the World Economic Forum, but what implications does it have (pragmatically) on nowadays society? This article will approach some advantages and disadvantages of the blockchain and how its possible applications may be disruptive in relation to many sectors but, first and foremost, let’s start with some brief background.

Created in 2008, the blockchain is an encrypted program that acts as an online ledger of transactions, and it provides an “irreversible, secure and time-stamped record”. Each block of transactions is linked on a chain, giving its participants an overall picture of what is taking place in the system. The program is designed to be decentralized, allowing transactions to take place between users without the need for third parties such as banks, or a central clearing system like SWIFT. In essence, in the context of finance, each user acts as their own independent bank —  free from administrative and associated costs, normally found in “traditional” financial centers. Each transaction is viewed as a single block where subsequent transactions or blocks are added. When a new transaction is recorded, a copy of the blockchain is sent to each node as they join the network (a node is each computer that is connected to the blockchain network). Blockchains can be public, private or hybrid (permissioned). The main principle behind it is trust, and the blockchain is safe, incorruptible and encrypted. By assigning to every single one of its users a public key, it allows them to identify their transaction publicly. Such key will not be disclosed by the blockchain, so every user can be totally anonymous, unless it is voluntarily disclosed.

Furthermore, records are not deleted on the blockchain, so nobody would be able to change the data stored on it, as it would have to change the whole “chain” of transactions.

As every new invention, one of the most important innovations is that the Blockchain is extremely cost effective. This is because it excludes intermediaries from the picture, but it does not only cut costs by doing so, it also increases efficiency.

Let’s analyze the impact on a sector-by-sector analysis

In respect to banking the blockchain could be effectively revolutionary. In fact, the implementation of the blockchain into the banking system would allow banks to save around 20B$ a year by 2022.

Looking at the latest news on the matter, it can be indisputably said that almost daily a new enterprise, a tech giant, or a new company comes out with an application of the blockchain. As an example, on the 15th of May, Amazon announced his partnership with Kaleido (CNBC article available here) in relation to the Bezos’ cloud computing service, to simplify the creation of a company based on the blockchain.

Particularly, one of the most interesting application of the blockchain relates to healthcare. In fact, a distributed ledger in relation to health records would allow any hospital to access medical data belonging to any individual, with no need of additional paperwork. This could be particularly useful in relation to emergencies concerning patients rushed into surgery. The threat here would be addressed in the context of data protection and privacy.

Another further implication in the same industry (i.e. healthcare) could be the distribution and tracking of pharmaceuticals. To this regard, the well-known multinational company Merck has filed a patent claiming that the blockchain technology enables a reliable, secure storage of the reading results with very high data integrity, such that it is essentially impossible to manipulate or erase or otherwise taper [sic] with or lose such data, e.g., due to unintended or deliberate deletion or due to data corruption.”[1]. Blockchain adoption would result in increased transparency, safer and more secured delivery of pharmaceuticals and decrease in the counterfeiting of healthcare products.

In the legal sector, the blockchain’s impact on Intellectual Property (IP) can be noteworthy. The constitution of blockchain networks in relation to IP offices, the traceability of trademarked products, the implementation of royalty distribution mechanism all have a sweet sound to the ears of the professionals working in this sector. To this regard, many international institutions are starting to use such technology to foster innovation. In fact, the European Union has set up the Bloomen project, where “blockchains will be used as a distributed database for media copyright information, for fast micropayments of media content, and for transparency in copyright management and monetization”. The expansion of such project would improve dramatically the efficiency of the sector.

Other figures within Intellectual Property, will may also take advantage of the use of the Blockchain, for example, regarding trademarks, it is expected that it will be possible to register or renew a mark using Blockchain technology. We know that the EUIPO is looking very seriously and actively at using blockchain to records and enforce IP Rights. However, in the USA, there is already an online platform using Blockchain technology to file trademarks (Cognate). The use of blockchain in the protection of trademarks or patents would represent a real revolution in the registration of these assets.

Similarly, another giant in the field of consultancy, Deloitte, is partnering up with the next participant to blockhaton, Seal Network, to develop an anti-counterfeiting platform and technology to stop such illegal practices.

In a different sector, another giant, Alibaba, has announced the pilot program to track international shipments to China, in order to safely be aware of the origin, shipment and destination of the effective product ordered.

In relation to fashion, blockchain may be disruptive too, as QR codes or tracking numbers on labels may be able to tell the customers the origin of the specific item, the full history of the supply chain behind each garment and possibly even more (i.e. the history of the company, the materials used, the instructions on how to wash, etc.). Since the statistics only for 2016 amounted to 1 billion dollars of counterfeited articles sold, blockchain would be a blessing for the sector, allowing to fight more effectively against the growing scourge of counterfeits and piracy.

A similar approach has been applied to food, for instance, in emerging markets. A traceability of the product “from farm to fork” would simply facilitate the business of guaranteeing an origin and avoid corruption and quality control. The matter concerning food safety has historically increased up to the point of creating Agencies in charge of such control. A giant in the industry of supermarkets, Walmart, has already successfully carried out several blockchain project, proving that such technology is a real game changer. Blockchain could also have an important role in the protection of foods identified and commercialized with a Protected Geographical Indication or a Designation of Origin, the control of raw materials (as to their origin, use, transformation, etc.), all of the aforesaid could be followed with greater ease and transparency.

The jewelry business may also be reformed and secured. Chemical fingerprints could radically change the industry and blockchain may be the key to track the diamonds, in order to guarantee the effective origin and a safe shipment too.

The industry of photography and works protected by copyright exposed to the dangers of internet may be helped by blockchain too. Since copyright does not need any registration to be valid, it does not depend to registries (unless the holder of such rights decides to submit them for registration to an Office). In this field, the real issue has always been the distribution of royalties to the legitimate owners and to the management entities of competence. As everyone can imagine, internet has certainly opened a new way of making business in this sector, but it has also exposed works to more infringements and violations. For instance, by allowing a file to be downloaded, the author spreads his/her work online and reaches bigger audiences indeed, but such audiences may not always be having pure and honest intentions and may misappropriate the copyrighted work.

Particularly, the afore-mentioned applies to the music industry. In fact, the advent of new technologies transformed the music industry into an important source of income with high levels of exploitation, notwithstanding the existence of blatant disadvantages (i.e. the increase in piracy and the lack of payment in relation to the reproductions).

The effects of technology in the music industry are twofold, on the one side there is the acceleration in the diffusion of musical works, which allows us to visualize a very positive scenario for authors and intermediaries, just as consumers are greatly benefited from this fact. On the other, there is the uncontrolled circulation in the network, the speed at which music circulates on the internet is unstoppable and untraceable by the holders of rights, since it facilitates the unauthorized use of digital works and recordings. Uncontrolled circulation reveals very negative consequences for the basic and intellectual property industry.

Another consequence derived from the implantation of new technologies in the basic industry is the change in the relations between the authors of music, services, intermediaries and consumers. The digital environment allows a direct connection between the creator of the musical work and the audience, and that is precisely why the blockchain could be a real game-changer in the music industry. Media Chain, for instance, a company recently acquired by Spotify, takes care of the royalty distribution matter, offering music platforms to protect the authors and their works in the online world. Mediachain allows artists to create a digital record for songs on the Bitcoin blockchain and InterPlanetary File System . Spotify, in fact, aims to use such tool to create fairer conditions and more transparency in respect to the payment to artist for their musical works.

The blockchain does not uniquely help the music sector in relation to copyright. In fact, it applies also to photographers, whose works are constantly at risk of being copied, used or transformed without being remunerated. The need to broadcast and divulge the work is often the most significant mistake that leads to piracy. To this regard, Kodak, earlier on in January 2018, firmly declared to be willing to develop a blockchain based platform to remunerate photographers through the use of Ethereum. Photographers will register their photos on the KodakOne  platform and buyers will purchase rights using the KodakCoin cryptocurrency. The platform will provide cryptographic proof of ownership and monitor the web for infringement, offering an easy payment system for infringers to legitimize their use of photographs. A pioneer to this regard is Fernando Alonso, the Formula 1 player who recently announced that he will be protecting his image and copyrights with KodakOne[2]. Mr Alonso is the first public figure to release such a statement.

Another sector where the blockchain has arrived into is the timestamped proving of paternity of literary works. An example of this is Po.et, a shared, open, universal ledger designed to record metadata and ownership information for digital creative assets. Po.et is a continuation of Proof of Existence, the first non-financial application of the blockchain.

An interesting article of February 2018 explained how the blockchain may be a solution which could definitely solve the adult industry of pornography. Already various projects are underway with ICOs in relation to this industry, as stated by the author of the article on El País (cryptocurrencies like Sexcoin, Titcoin will be used as purchasable tokens and reusable on the various adult blockchains by keeping complete anonymity).

Conclusions

The blockchain technology has created a whole new playing field, and the game could yet be very hard-fought. With the prize at stake of higher transparency, efficiency and cost-effectiveness, it remains to be seen whether this becomes a winner-takes-it-all race and how the issue of standards for the technology will be managed.

Blockchain enables a completely new level of information exchange between different kind of industries, some of them unknown until now and others just emerging.

This new technology has a huge potential to help everybody improve their creativity, their relationship with technology and the realization of new business and, consequently, increase the value of such new creations. Obviously, the protection of these new assets will be closely linked to the protection of intellectual property, a field in which, as we have seen previously, Blockchain is already playing a leading role, providing different solutions to securing IP assets and innovation processes.

In our opinion, although blockchain is still growing day after day, it is getting closer to its breakout moment and it is just a matter of time before it will be necessary to adapt all related regulation, inter alia, IP laws.

[1] https://cryptodisrupt.com/blockchain-in-pharmaceuticals-fighting-counterfeit-drugs/

[2] http://www.expansion.com/directivos/deporte-negocio/2018/07/03/5b3a8605e5fdea8f2f8b45ba.html

Winds of change are blowing in the international Copyright panorama

Rebeca Nieto
IP Expert at Latin America IPR SME Helpdesk

Francis Gurry, WIPO’s Director General, pointed out in a recent interview the challenges posed by new scientific and technological developments for IP administration, policy and governance.

In this sense, it is nothing new that Intellectual Property Law, as any other field of law, lags behind technological, market and social realities. For this reason, it is in the hands of law-makers, authorities and industry to take all the necessary steps to adjust current regulations to the existing scientific and technological development.

However, if we actually look at the European and Latin American national and regional legislation panorama, we can notice that most of them require an update and adjustment in their copyright regulation to match the new digital reality.

In this regard, the major challenges to be addressed are the digitalization and distribution of content over Internet, the improvement of access to online content and cross boarder access, the current and future development of the “Internet of the Things”, appropriate protection of creators and fair payment for the online use of their works, among others.

Nonetheless, the digital revolution not only involves difficulties, but also opportunities. As regards copyright, creators such as Imogen Heap, are becoming aware of the business prospects that new technologies like Blockchain can bring to them. Imogen Heap, through her Mycelia project, has been the first author that has distributed her song, Tiny Human, by means of a smart contract using block chain.

Given the current context, it is not surprising that the negotiating and adopting a new Copyright legislation is not a piece of cake.

In Europe, for instance, the proposal of the Directive on Copyright in the Digital Single Market, has received nearly 1,000 amendments. Even so, the approval of said Directive is getting closer. On the 10th of October, the Juri Committee is expected to vote on the content of the new EU Copyright Directive.

The key issues at debate are:

  • The creation of ancillary rights for press publishers (art.11).
  • The obligation for online service providers to monitor and prevent copyright infringements by users (art. 13).
  • The mandatory exceptions related to teaching activities, text and data mining and preservation of cultural heritage (art. 3-5).
  • Fair remuneration in contracts for authors and performers (art.14-16).

It must be note that In Europe, a Community Directive of 2001 is in charge of regulating the Digital Market.

In Latin America, most national and regional copyright legislations (such as the Decision 351 of the Andean Community) also require an update to match the requirements of the digital era. It should be borne in mind that the majority of them were approved long before the irruption of the information and communication revolution.

Nonetheless, these region are taking action as reflected in the last Regional Meeting for Directors of the Copyright Offices of Latin America held in Colombia. The participating countries (Argentina, Brazil, Chile, Colombia, Costa Rica, Cuba, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Paraguay, Peru, Dominican Republic, Uruguay and Venezuela) addressed current global issues. “Rights management in the digital environment: initiatives to make the management and ownership of digital rights more efficient” and “Orange Economy, Challenges and Opportunities in the Fourth Industrial Revolution, Intellectual Property Rights and Entrepreneurship” are one of the topics that were addressed during the Meeting.

Even though many Latin American countries have introduced modifications in their national Copyright laws over the last years, such as for Colombia, Ecuador or Brazil, as a rule of thumb, it can be said that digital challenges have not yet been fully addressed in this region.

Expect legislative changes in the near future. To be up to date about Latin America’s latest copyright and IP developments, do not forget to visit our news section or subscribe to our newsletter.

In addition, if you are planning to internationalize your creative business to Latin America, please read our Factsheet Copyright in a nutshell and our Factsheet Protecting your creations in the Andean Community, or contact our Helpline for further information.

Freedom of speech through the Internet in Mexico

Sergio Rangel
Intellectual Property Expert at Latin America IPR SME Helpdesk

 

Background

On June 2017, the Mexican Supreme Court of Justice (@SCJN) analyzed an Amparo suit filed by Alestra, S. de R.L. de C.V., a well known Mexican internet service provider (ISP), filed against the §199 Bis. Industrial Property Law preliminary injunction granted by the Mexican Institute of Industrial Property, also known as IMPI. The preliminary injunction rationale was the alleged infringements by storing and disseminating copyrighted music works, via a webpage.

In order to stop the allegedly infringing activities of said webpage, IMPI ordered Alestra and other ISPs to block the IP address in Mexican territory.

Alestra challenged IMPI’s preliminary injunction, in lower federal courts via an Amparo suit (Constitutional appeal) and lastly the case reached the highest Court in the country.

Supreme Court Justice Alberto Pérez-Dayán, member of its Second Chamber, drafted the opinion which resulted in two precedents. [1] [2] Per the opinion, blocking a webpage may violate the freedom of speech (recognized human right in the Mexican Constitution as well as in international treaties). It is mandatory for any Mexican government agency to take into account the freedom of speech as part of the limits to impose preliminary measures. Likewise, the injunctions shall be deemed in the law, grounded in a legitimate purpose, as well as necessary and proportional.

Because freedom of speech shall be a major concern to the Mexican State, any limitation cannot be unreasonably wide or generic. So a general block may be suitable only when exceptional circumstances raise, including inducement to terrorism, hate, racism, discrimination, genocide, violence, child pornography, etc.

Likewise, the threat of potential distribution of illegal copyrighted material is not per se a valid argument to entirely block a webpage since this blocking may include legal contents and protected speech, resulting in censorship.

Concerned of the application of the aforementioned precedents, the Mexican Association for the Protection of Intellectual Property (@AMPPI_AC) organized on September 1st, 2017, the conference: “#LibertadDeExpresión. Supreme Court criterion related to blocking of webpages and its interaction with the Intellectual Property”.

Justice Alberto Pérez-Dayán was the speaker on behalf of the Mexican Supreme Court of Justice.

In my opinión:

In the last months, Intellectual Property Rights owners and colleagues have been shocked due to the opinion of the Mexican Supreme Court of Justice, regarding the blocking of webpages. Apparently, the opinion blocks most of the online enforcement administrative actions. I disagree.

Seems clear that the Court is not restricting the authority of IMPI to grant preliminary injunctions against webpages, but establish rules.

Because the generic block is an extraordinary measure, it demands also extraordinary work to justify it.

Blocking webpages is constitutional when the authority properly rationale that the measure is adequate to prevent violations to intellectual property rights.

The blocking of a webpage must be reasonable and proportional. As Justice Pérez-Dayán said; a block may be applicable when the transit through the webpage is impossible without run into illegal contents.

Therefore, the matter is not to face a technical matter v. Human Rights, or to confront Freedom of Speech v. Copyrights. The matter is to prevent a government agency to misuse authority that may result in a disproportional   enforcement action or censorship… is to work hand-in-hand with IMPI to obtain rational injunctions that may result in a partial or even in total block of alleged-illegal contents.

Total block of webpages may be constitutional, but depends in how the block is carried out.

[1] BLOQUEO DE UNA PÁGINA ELECTRÓNICA (INTERNET). DICHA MEDIDA ÚNICAMENTE ESTÁ AUTORIZADA EN CASOS EXCEPCIONALES.

[2] LIBERTAD DE EXPRESIÓN EJERCIDA A TRAVÉS DE LA RED ELECTRÓNICA (INTERNET). LA PROTECCIÓN DE LOS DERECHOS DE AUTOR NO JUSTIFICA, EN SÍ Y POR SÍ MISMA, EL BLOQUEO DE UNA PÁGINA WEB.

From vlogger to freebooter – the difference a URL can make

Adriana Hernández Gallegos
Project Manager at Instituto Tecnológico de Estudios Superiores de Monterrey – ITESM

In November 2015, the number of videos that were published in Facebook pages exceeded the number of audiovisual works registered in Youtube, making Facebook the most popular platform for sharing videos. Facebook has worked hard in recent months to improve video-watching features and functions, and adjusting its algorithm to give preference to those videos that allow more interaction. Facebook has now become the giant of video-sharing in the internet.

The quantity of video posts uploaded on Facebook is impressive, but recently, many video creators are rightly complaining about the dubious origin of the videos shared on this site and the lack of copyright enforcement strategies by Facebook. And what does this have to do with you? Many of us have probably watched a video on Facebook that was uploaded without the authorization of the video creator. Actually, according to a recent report from Ogilvy and Tubular Labs, “out of the 1000 most popular Facebook videos of 2015, 725 were re-uploads by people who didn’t own the video.”

This action of downloading copyrighted content from a media hosting site and re-uploading it without the creator’s authorization is called “freebooting”, a term created by Brady Haran, during his “Hello Internet” podcast. Before the term existed the practice of re-uploading content without authorization was called “infringement”, but as Haran said, it was considered a very soft word for this practice.

Right now many people and companies continue to freeboot, impacting the economy of Youtube channels and creators. But how is this happening exactly? Remember those ads showing when you start watching a video on Youtube? Well this is part of the revenue sharing strategy from Youtube, in which the site shares a percentage of money given by companies for advertisement to the creator of the video where the ads are being shown. Believe it or not, there are people that make a living in Youtube, but they need a large number of views to make a real income from their videos. If someone posts and shares a freebooted video, the views from the freebooted video are not counted toward the number of views that are profitable to the creators. In other words, each time a freebooted video is watched, the creator of such video loses the opportunity to make a profit.

Youtube video bloggers (Vloggers) around the world have started the conversations about how this dishonest practice affects their industry, pointing in particular the lack of protection they have in some social networks and sites. Specifically, Facebook has become one of the most criticized sites by the vloggers, given that the massive number of Facebook users represents the vlogger’s main opportunity loss.

Hank Green, American entrepreneur, blogger, and vlogger, famous for his YouTube channel “Vlog Brothers”, published a blog post where he accused Facebook of cheating, lying, and downright stealing video content. Facebook responded to this accusation arguing that they are committed to help people and organizations protect their intellectual property rights, but the company has not made any substantial changes to their video management platform to prevent freebooting.

What can you do to prevent it?

If you want to promote an artist, a creator, or a vlogger; you need to provide the URL to the source material allowing users to directly access to the original media site. You can also help by reporting those videos that are being freebooted on social media and other sources. These solutions are free and take only a few clicks. It comes back to the average user to make the internet a better place.